How the Income Tax Act Works for Gig Workers

gig economy worker taxes

H&R Block does a survey each year on gig workers and intentions toward tax. In this year’s survey the notable results are:

“When it comes to declaring gig-related income, the research reveals that a significant portion of gig workers are willing to take risks when filing their taxes. More than one in four (27%) gig workers said they didn’t declare all of their gig income when they filed their taxes in 2023 (for 2022 tax year). Now that 2024 tax filing season is in full swing (for income earned in 2023), almost half of those surveyed (43%) said they’re willing to take the risk of not declaring ‘all’ gig work related income, with a further 32% willing to take the risk of not declaring ‘any’ gig-related income.” 

You Should Always Declare

Not declaring income and revenue is a bad idea for numerous reasons, including getting caught and having significant penalties and interest charged once the CRA catches up to the taxpayer. However, not declaring income and revenue means that one is also not amassing additional RRSP room and contributing more to their CPP benefit. In addition, as H&R Block correctly explains:

Gig workers are entitled to a vast array of deductions and credits: 

The good news is there are numerous expenses, credits and deductions that gig workers can claim. While the range of expenses you can claim depends on the type of gig work you are engaged with, they can include:

  • Auto-related expenses (kilometres related to the gig work, car maintenance in relation to work, etc.)
  • Travel expenses
  • Software subscriptions
  • Home office expenses (such as portion of utilities, home repairs, cleaning costs, rent, mortgage interest, property taxes, and home insurance in relation to the size of the home office)
  • Mobile phone and internet bills
  • Advertising and marketing costs (such as website, social media)
  • Shipping costs 
  • Accounting and legal costs
  • Meals and entertainment for clients (at 50% deductible)
  • Professional development activities, such as seminars or courses 
  • Interest or bank charges on money borrowed for business

 

All of which brings me to the point of the headline. The way that income tax is calculated is income – deductions + credits = taxable income. What this means is only the profitable part of your gig earnings are what are taxed. Simply keeping good records is what will increase what you keep. Instead of trying to avoid the taxman, try to keep good records, find an affordable tax professional (their fee is also deductible) and you will be amazed at how much you will keep.